Like many municipalities, the City of Roseville faces a pension problem.
The city’s annual contribution to the California Public Employees’ Retirement System (CalPERS) has become a bigger part of the budget in recent years, said Roseville spokeswoman Megan MacPherson. The city’s contribution was $21.9 million in the 2009-10 fiscal year and $21.7 million in the current year.
City staff is attempting to devise a long-term solution to mounting pension bills as they finalize the proposed budget for the 2011-12 year, which will be presented to Roseville City Council during a workshop Monday, June 6.
“PERS costs are rising in fiscal year 2011-12 by $2.5 million for the general fund,” said City Treasurer Russ Branson. “This is putting budget pressure on the city during a time of declining revenues. The city recognizes the need to control pension costs and is actively pursuing cost-reduction options.”
City Manager Ray Kerridge said this year’s spending plan is shaping up to be a “status-quo” budget. There will be no layoffs, no furloughs and no major cuts to services. Sales tax is up 2 percent over last year and property taxes have stabilized — signs the local economy may be on the mend.
But the city still has a structural deficit.
“The fact is we’ve got to take a look at pensions,” Kerridge said. “I’d rather we take care of the issue ourselves than the legislature.”
The California Legislature has introduced bills aimed at eliminating pension spiking, modeling pensions after a 401(k)-type retirement plan and other reforms.
“Our current system doesn’t appear to be sustainable,” said Councilman Tim Herman. “We’re working with the unions to come up with a plan so the city is not in a position like the state and other cities to have unfunded liabilities.”
How do pensions work?
Currently, Roseville’s public safety employees — sworn police officers and firefighters — have a 3 percent at 50 formula, which means an employee retires at age 50 with a pension equal to years of service times 3 percent times his highest salary.
The formula for the rest of city staff, called “miscellaneous,” is 2.7 percent at 55.
Members of the Roseville Police Officers Association, the union representing sworn officers, contribute 3.5 percent of their base pay to CalPERS and the city contributes 5.5 percent for a total 9 percent contribution. Starting July 1, the city will also pay the employees’ portion.
Members of Local 39, representing a large portion of the city’s non-management employees who aren’t firefighters, police or electrical workers, contribute 4 percent to CalPERS and the city also contributes 4 percent. The city will pick up the whole tab starting Jan. 1, 2012.
Like many other local governments, Roseville is increasing its contributions to accommodate the higher CalPERS rates being phased in over the next three years, and which will be in place for 30 years.
According to CalPERS, the weighted average annual pension for all payees across the state through the end of the 2010 fiscal year was $26,263. Seventy-four percent of all retirees receive $36,000 or less a year.
CalPERS was unable to supply the Press Tribune with the average annual pension for former Roseville employees by press time.
Currently, 33 former Roseville employees — all men — make an annual pension of at least $100,000.
People sometimes start working for the city with service from other CalPERS agencies, and when they retire all of their benefits are not necessarily through Roseville.
Several former employees making $100,000 or more worked for Roseville for a few years but retired with 30-plus years of CalPERS credit that wasn’t earned with Roseville and was calculated at whatever formula the other agency or agencies used, MacPherson said.
Roseville is negotiating with labor groups to determine if the 2011-12 budget will include any employee concessions, which might involve employees paying their share of CalPERS contributions, changes to retiree health benefits and a two-tier system, which means new hires would have a less-generous formula.
Sacramento County — which doesn’t belong to CalPERS — recently secured labor agreements with the majority of its staff agreeing to no raises for two years and no retiree health subsidy. The new pension formula will be 1.92 at age 60 for miscellaneous and 3 percent at age 55 for public safety, with new hires coming in at the new tier.
Previously, the county’s employees agreed to pay their full share to the Sacramento County Employee’s Retirement System.
In February, the City of Folsom approved an agreement with Local 39. Beginning in July, these employees will pay 7 percent of their salary toward the employee portion of CalPERS. The following fiscal year, they will pay an additional 1 percent to cover the full employee portion.
Future Local 39 employees in Folsom will be hired under a new pension formula, going from 2.7 percent at age 55 to 2 percent at age 55.
Problems in good times and bad
Scott Milligan, representative for Roseville Firefighters Local 1592, said as pension reform has become the hot topic, public employees are portrayed as “the cause of all things evil.”
“While I do believe there needs to be some steps taken to ensure the sustainability of our retirement system and stabilize our budgets, I don’t believe the issue is fully understood by most, nor do I believe it is quite as bad as it is being made out to be,” Milligan said.
But, he said, one problem involves how CalPERS determines the amount an employer pays to provide retirement benefits for workers. When CalPERS has a good year financially, the employer’s payment to CalPERS is reduced or eliminated. This leaves discretionary funds in the millions of dollars that government agencies use to fund other programs.
When CalPERS investments perform poorly, higher payments are required by employers to make up the difference.
“The obvious problem is that during good times when agencies have money they are given the ability to withhold payments that should be set aside for pensions, but are required to pay more when they don’t have it,” Milligan said. “This issue and others like it are not going to be solved at our local level.”
He said if Roseville stops paying agreed-to contributions to employees’ pensions, firefighters would have to pay 9 percent of their salary. Previously, firefighters forfeited salary increases in exchange for the city paying that 9 percent, he said.
Milligan said the fire department is actively trying to help the city balance its budget, while not at the expense of employees. Over the past eight months, the department has made $1.7 million worth of cuts and structural changes.
Charlie Solt, representative for Local 39, said his union has agreed to discuss ways to reduce the city’s future liabilities in terms of pensions and other benefits.
“Our membership has made concessions over the years including forfeiting Social Security and cost of living increases to protect their pensions,” Solt said. “As with all investments, pension plans have good years and bad years. Local 39 (believes) that with a recovering economy, the city’s pension plan remains reasonable and sustainable.”
Roseville employees do not earn Social Security benefits, unlike some public agencies whose retirees receive those benefits in addition to any pension.
“We’re working with the unions to get something fair and that will be there for them,” Herman said. “We don’t want something that looks great and all of the sudden falls apart and then they don’t have anything. We don’t want to make promises we can’t keep in the future.”
Sena Christian can be reached at senac@goldcountrymedia.com.
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Roseville’s 100K pension club:
Former City of Roseville employees who make $100,000 or more annual pension*
Name/Position Annual/pension
William Robinson, City manager, $189,913
Michael Shellito, City manager, $188,018
Tom Habashi, Electric utility director, $170,939
Joel Neves, Police chief, $170,412
Kenneth Wagner, Fire chief, $161,015
William Duarte, Electrical engineer, $143,415
George Fraser, Electric utility director, $142,790
Michael Dorn, Engineering aid, $141,250
John Barrow, Police chief, $140,229
Greg Cowart, Police chief, $135,190
Larry Pagel, Planning director, $129,966
Terry Sharp, Battalion chief, $128,616
John Palmer, Battalion chief, $128,538
Stanley Lumsden, Police captain, $127,244
John Fitzgerald, Police officer, $125,079
David Kennedy, Fire captain, $124,965
Gary Shonkwiler, Police captain, $123,843
William Rose, Fire captain, $122,369
Steven Murphy, Fire captain, $121,922
William White, Fire chief, $116,710
Mark Romer, Fire division chief, $116,429
Mark Beck, Battalion chief, $112,611
Allen Johnson, City manager, $112,593
Greg Butler, IT operations manager, $112,503
Sonny McCraw, Electric operations manager, $110,556
David Braafladt, Police captain, $109,925
Joseph Reding, Electric line maintenance supervisor, $108,831
Steven Uribe, Police lieutenant, $107,281
Kevin Dickson, Fire division chief, $106,426
Terrance Albers, Electric line maintenance supervisor, $105,323
Michael Leana, Planning director, $104,205
Mark Doane, City attorney, $104,056
Steven Dillon, Community development director, $103,251
Source: CalPERS and City of Roseville
* As of March 1, 2011